VDRs vs. Generic File Sharing Services

INTRODUCTION

Generic file sharing services such as corporate email, Dropbox or Google Drive might seem like comparable options, however, they are not sufficient for protecting an organization’s most sensitive information.

Compared to the professional capabilities of a VDR, generic file sharing services make large-scale document sharing complicated, inefficient and difficult to navigate. VDRs are purpose-built to share thousands of documents and highly structured folders with 3rd parties securely and safely. This ease of use allows organizations to avoid any unnecessary delays during important deals or processes.

The basic permission settings found in generic file sharing tools make it all too easy to accidentally share data with the wrong people, compromising yours or a client’s confidential information. They also don’t provide the detailed tracking, auditing and reporting that professionals require to monitor user activity and document security.

Investing in a virtual data room offers you specialized security and control features, as well as compliance with international security standards such as GDPR, SOC 2, and HIPAA, as well as a polished, professional appearance when dealing with other companies. Because of their robust bank-level security, virtual data rooms, unlike generic file sharing services, are typically not restricted by security-conscious companies and CIOs.

What Does A VDR Have to Offer?

These are the core capabilities a VDR provides for supporting transactions and mission-critical processes including diligence, compliance, and litigation.

Security

Broadly speaking, virtual data rooms offer a level of security similar to that of financial institutions and major banks. When you invest in a VDR, you are paying for the utmost security for your sensitive documents. These are some of the security capabilities and compliances that will ensure that your confidential information is safe and secure. Multiple physical data centers implement key card access along with fire control and multiple backups. With major internationally recognized security compliances, and customizable user permissions for complete control, the documents you share via the VDR are only accessible by the right third parties at the right time. And of course, all data is encrypted at rest and in transit and protected behind multiple firewalls to mitigate the risk of a breach

Control

The specialized features of a virtual data room are designed to reduce the risk of human error by allowing a user to ensure that the right third parties can view the right documents at the right time

• Various security measures can be configured at an administrator’s discretion, including:
  1. Disable print / download
  2. Dynamic watermarks
  3. Document expires

• Customizable permission settings—either user or group-based— allow control over who has access to certain documents within the data room. Before a document is shared, an administrator has the option to set an expiration date and time or revoke access remotely at any point during the transaction for digital rights management

• A VDR administrator can decide to watermark every page of an electronic document or spreadsheet, and/or opt to completely disable print or download features to avoid leaks or unwanted document disclosure. These options allow you to find the right balance between security and ease of use for the guests you invite to the data room to review documents

• Activity reports allow an administrator to track and audit the activity of users or documents. This is especially helpful during sell-side M&A transactions since an advisor is able to determine the level of interest their documents are inciting in potential buyers

Ease of Use

When a business process or transaction requires sharing and reviewing thousands of documents, how well those files are organized and how easy they are to access is critical. Highly structured folders and files must comply with strict guidelines for how they are organized and numbered. This is so multiple counterparties and reviewers involved in the process can access and review the documentation in a fast and efficient manner. Well-organized and clearly numbered folders go a long way toward helping reviewers find the files they need to review; search and versioning also help avoid delays and keep the process moving. For the VDR administrator who is managing the transaction or process, the bulk file upload process must be fast and intuitive

VDRs enable easy and secure access to confidential documents anytime, anywhere. Document sharing within a virtual data room is made easy with folder templates such as due diligence checklists and drag-and-drop upload abilities. These features save time and energy when populating a data room with documents and building complex folders structures. When thousands of documents, including numerous large files, need to be uploaded and shared, it’s easy to see why you wouldn’t want to have to manually organize all of this information in the data room from scratch.

For intricate transactions that involve revisions to documents, versioning is a helpful tool that makes the latest versions of documents easy to find and review. Third parties know that they are reviewing the latest greatest version of a document and aren’t wasting their time wondering if they have the correct version of a document.

If you’ve ever tried to quickly find a specific version of a file in a crowded Dropbox or drive, you’ll understand why this is an important feature. Additionally, Q&A abilities foster communication between users within the data room. Administrators can efficiently organize and control the Q&A process among multiple parties without having to resort to email. Questions and answers can be sorted based on folders or groups, priority levels can be set, and reports can be generated to show the questions that have been asked and who has asked them. A Q&A tool allows an administrator to efficiently manage questions and answers from counterparties and avoid time wasted answering redundant or repetitive questions.

Some vendors offer an annual, unlimited-use subscription contrasted to a single use transaction. If you are planning to open more than two data rooms then it might be more feasible to opt for an annual subscription. This option brings advantages like the ability to start and pause projects at will, and open as many data rooms as needed for various projects and use cases. With a subscription, there is more predictability with the cost of the VDR and you can rest easy knowing you already have a data room “on standby” and ready to go.